Click the or Save to add a property

My Searches(0)

Click Follow Search to add a new Search

How to Find a Co-signer

Know how to find the right mortgage co-signer

By Deena Weinberg

Application-Process

If you have poor credit history, an unsteady job, a high debt-to-income (DTI) ratio or if you don't qualify for a loan for any other reason, you may be in the market for a mortgage co-signer. In co-signing, a second person agrees to back up your loan and guarantees the lender (i.e. the bank) that the loan will be repaid. If you want to fulfill your dream of becoming a home owner, a co-signer can give you the borrowing strength you need. However, since you are entering a long-term, legal relationship with this person, you want to be very cautious about who you select as your partner.

Not only does a co-signer need to be credit-worthy today, but you need to trust that he or she will remain financially stable and committed in the long term as well. Here is some sound advice on how to find a good co-signer.

Look for someone with good credit history

In order for the bank to approve your co-signer, look for someone who meets the bank's financial criteria - i.e., someone who has a high income or good credit - to offer the bank assurance that your loan will be repaid. A co-signer must be at least 18 years of age, and the bank will examine their income, credit history, credit score, assets and debts. Besides the mortgage debt, the bank will take into account homeownership fees (insurance and maintenance) as well as tax costs, even if the co-signer will not be residing on the property.

Consider family and friends first

The experts advise first considering a trusted family member or friend as your co-signer. There are risks for the co-signer as well, and family and friends are more likely to be willing to step up to the plate to help you out. For married couples, one's spouse typically acts as the co-signer for a mortgage. If you are single, you might want to ask your parents, partner or other trusted family member to come to your assistance.

Get it in writing

Trust is nice, but since co-signing is serious business, you are advised to put this trust into writing by means of a formal contract. A lawyer can help you and your co-signer draw up an enforceable agreement that specifies who will pay the bills, who will occupy the residence and other responsibilities.

People co-signing with family members often reject the notion of signing a contract. Yet it is not uncommon for things to go awry years later, and for each co-signer to have a different recollection of the agreement and insist that his or her version is correct. Therefore to ensure that yours is a happy homeownership experience, draw up a contract and keep a copy of it handy.

Understand the implications of being a co-signer

Unfortunately, there are many stories of a co-signing relationship going bad in the long term - even when the co-signer is a best friend or immediate family member. For example, unbeknownst to you, your co-signer could use the property as collateral for another loan, or suddenly demand full ownership of your home or 50 percent of the property's value. Entering into this relationship poses risks for co-signers as well. If you fail to make payments on time, not only is the co-signer financially responsible to cover your debts, but the co-signer's credit history and DTI also suffer, which can impact their ability to be approved for other loans or to purchase property in the future.

Looking for the best mortgage? Let realtor.com® help you successfully navigate the world of home finance. Our mortgage center offers several financial calculators, free tools, and lending products to help you through the mortgage process. Use our home affordability calculator to help you figure out how much home you can afford. With our mortgage calculator, you can estimate your monthly payments. Is it better to rent or buy? Realtor.com® can help you make the best home finance decision with our useful rent vs. buy calculator, which helps you estimate the difference between renting a property or buying a home over time. Before you start searching for the perfect home loan, find the best mortgage rates and loans at realtor.com®. For additional resources and advice, browse our extensive library of finance articles and get the information needed about mortgage rates, mortgage lenders, credit scores, home insurance and refinance.

Operated by NATIONAL ASSOCIATION OF REALTORS®

realtor.com® is the official site of the National Association of REALTORS® and is operated by Move, Inc., a subsidiary of News Corp.

REALTOR®, realtor.com®, the spherical icon of a house within a circular map, the “WHERE HOME HAPPENS” tagline and stylized logo treatments including any one or more of the foregoing are trademarks of the NATIONAL ASSOCIATION OF REALTORS® and are used with its permission. These and all other trademarks used in this work are the property of their respective owners.